- American International Group Inc.(AIG) may benefit from a government plan to buy distressed mortgage assets, NY Insurance Superintendent Eric Dinallo said.“It is likely that it could help,” Dinallo said.Issuers of credit default swaps may have the chance to cancel the contracts if the underlying assets get bought by the government, Dinallo said.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Gaming longs, Computer longs and Internet longs. I covered all my(IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is above average. Investor anxiety is elevated. Today’s overall market action is bullish. The VIX is falling 15.3% and is elevated at 39.71. The ISE Sentiment Index is below average at 117.0 and the total put/call is high at 1.25. Finally, the NYSE Arms has been running low most of the day and is currently .54. The Euro Financial Sector Credit Default Swap Index is falling 11% today to 117.33 basis points. This index is up from a low of 52.66 on May 5th, but down from 157.81 on Sept. 16th. The North American Investment Grade Credit Default Swap Index is falling 2.0% to 171.50 basis points. The TED spread is falling 11.3% to 3.14 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down another 7 basis points to 1.56%, which is down 106 basis points in less than three months and at the lowest level since January 2003, when deflation was the concern.The Goldman Sachs Hedge Fund VIP Index(favorite longs of the hedge fund community) is rising 3.9% today after yesterday’s steep decline.This index is now down 18.7% for the quarter.I think much of yesterday’s decline was related to hedge fund redemption selling.I am hearing more and more chatter of coordinated global rate cuts, which would be a large positive.As well, Reuters reported over the last hour that the SEC will say the results of disorderly transactions are not determinative when measuring fair value.This should have been done a long time ago, but nonetheless would be another large positive.The US dollar continues to trade very well and I suspect this will again begin to weigh on most commodities over the coming weeks.Weekly retail sales rose 1.4% this week versus a 1.5% gain the prior week.The four-week average of weekly retail sales is a gain of 1.6%, which is below the long-term average, but well above the .6% gain during February of this year.The main negatives I see today are that breadth isn’t that great and some key gauges of credit angst continue to rise.These gauges need to begin to meaningfully reverse to ensure a sustainable stock rally.Nikkei futures indicate a +450 open in Japan and DAX futures indicate an +106 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, less financial sector pessimism and short-covering.

- There is a “decent chance” that European central banks will enact “emergency” interest-rate cuts as soon as this week to calm financial markets and spur economic growth, Citigroup Inc. economists said.

- Ships that were scheduled to be demolished because of their age are being “pressed” to continue hauling cargoes as falling prices for scrap metal cut margins for companies that break up such vessels.Indian and Bangladeshi buyers are prepared to pay $570 per lightweight ton for ships for demolition, down from a record $750 a ton previously, the report said.

- The Reuters/Jefferies CRB Index of 19 commodities plunged 5.9 percent, the biggest drop since record-keeping began in 1956, on concern that a spreading financial crisis may slash demand for raw materials.The CRB has slumped 28 percent from a record on July 3 as tightening credit markets, failing financial institutions and slowing economic growth heightened demand concerns. The drop today was led by crude oil, gasoline and cocoa futures. Crude and gasoline both fell as much as 11 percent. Cocoa dropped as much as 8.3 percent.

- Platinum will swing from a deficit to the largest surplus in 10 years as demand declines amid an economic slowdown, said Paul Walker, CEO of London-based research company GFMS Ltd.“Supply has not fallen by as much as people expected,” he said.“Demand in auto catalysts and jewelry, especially in China, is really falling.”

- Hong Kong property prices will decline faster-than-expected and may fall 35% more in the primary market before the end of 2009, citing research by Goldman Sachs Group Inc.(GS).Secondary home prices are also expected to fall about 25% in the same period, citing Goldman research.

BOTTOM LINE: Asian indices are sharply lower, weighed down by financial and commodity stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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